UK: Investment consultants face major changed under new CMA remedies

Investment consultants, which advise groups such as pension trustees, could be forced to split up their businesses or face mandatory tenders for their work in new rules being mulled by the UK’s competition watchdog.

The Competition and Markets Authority (CMA) released a working paper today as part of its ongoing plan to boost competition in the massive investment consultant and fiduciary management industry, which advises clients with more than £1.6 trillion (US$2.2 trillion) under management.

While demand for fiduciary management, a type of asset management service used by pension funds and other investors, has “grown strongly” in recent years, the CMA warned in a report on March 29, that a significant proportion of investors ultimately used their investment consultant’s own fiduciary management service.

The CMA said it found evidence that pension funds and other investors are being steered towards the services, which are often highly profitable, by their investment consultants, reinforcing concerns about a lack of competition in the asset management industry. “The evidence we have reviewed indicates that selling [fiduciary management] services to existing [investment consultancy] clients is an important part of many integrated firms’ strategies to grow their businesses,” it said.

Full Content: Financial Times

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